New regulations mean home ownership further from reach for potential buyers

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PRICE POINT Although the average home price is about $1.2 million, low-wage employees without a 20-per-cent downpayment will find it more difficult to qualify for insured mortgages.

The federal government's new rules regarding mortgages could spell the difference between home ownership and continued renting for Whistler and Pemberton residents.

Pemberton realtor Patrick Saintsbury said the combination of price increase and tougher qualifying regulations for an insured mortgage can make it tough for those dreaming of home ownership — especially in light of a price increase that spiked by as much as 30 per cent in the past year.

"A house that would normally sell for $550,000 in Pemberton was selling for $700,000 — that's insane," he said. "If you wanted a $400,000 mortgage, you have to prove you can afford a $500,000 mortgage. So, for first-time buyers, that's beyond the pale."

The price increase in the past year has sparked some record sales, but is showing signs of a cooldown just as the federal government announced last month that any homebuyer with less than a 20-per-cent down payment must pass a 4.64 per cent, five-year stress-test interest rate to qualify. Previously, Canadian Mortgage and Housing Corporation insured mortgages could be secured with a down payment of less than $20,000.

Someone who previously qualified for a $300,000 mortgage would now only be able to qualify on $235,000, said one of Whistler's licensed mortgage brokers, Karen Garrett.

"It's so tough," she said, adding that potential buyers will now have to come up with a larger down payment, or consider having someone co-sign their mortgage.

The stress-test mortgage calculation is based on a five-year term at a benchmark rate of 4.64 per cent — which the federal government reasons would prove that fewer homeowners would default on mortgages if rates were to rise.

The five-year fixed interest rate is currently at about 2.5 per cent. But the stress-test benchmark rate is not fixed, Garrett explained.

"It will actually change depending on what the Bank of Canada deems the benchmark rate to be. That's a key point," she said, adding that she thinks the government is targeting the wrong people.

"The government is trying to put fail-safes in place to stop the Canadian homeowner from getting too far into debt, but ironically, they don't go after the credit-card companies, and the department-store companies who allow people to not only have high credit, but allow them to increase the credit without any financial clarification."

Garrett said lending levels for mortgage approval already are effective: "We have to prove (a buyer's) income three ways to Sunday — we have to be able to show that their credit is clean. There are so many ways that we already protect the buyer. To add this layer seems like it's going off on the easiest thing to oppose."

Saintsbury said the mortgage changes and the newly implemented foreign ownership tax are the latest methods that governments are using to try to cool the housing market — largely in metro centres such as Vancouver. But the trickle-down already has reached Whistler and Pemberton.

"I think what we will see is people just simply say they can't afford to live here. I know a lot of people have left here because they can't be spending 65 per cent of their income on accommodation. It's not sustainable. Wherever the money is, that's where the young folks are going," Saintsbury said.